- Says programs with reduced interest rates to be studied before they are taken forward
- Notes cheap access to capital important but schemes have to be aligned with policy priorities
- Assures loan schemes will be expanded and strengthened in future
Loan schemes with preferential interest rates such as Enterprise Sri Lanka will be reevaluated and restructured to align with prioritised growth sectors and policy objectives by the new administration, the Finance and Economic Affairs Policy Development Ministry said yesterday.
Responding to reports that the Enterprise Sri Lanka program had been put on hold after the new Cabinet was appointed, the Finance Ministry, which is now headed by Prime Minister Mahinda Rajapaksa, said that after a comprehensive analysis the loan schemes would be taken forward.
“The Finance Ministry is aware that cheap access to capital for small and medium businesses makes an important contribution to drive forward the economy,” the statement released by the Finance Ministry said.
“The Government’s stance is that existing loan schemes have to be linked with identified priority areas of the economy.”
The Finance Ministry has therefore decided to revaluate and restructure the loan schemes with preferential interest rates that were introduced under former Prime Minister Ranil Wickremesinghe.
“After a comprehensive analysis these loan programs will be reintroduced and expanded. They will be focused on the priority areas focused on by the Government and in alignment with the policies outlined by the Government. The loan schemes will be continued with greater strength and efficiency,” the statement added.
Enterprise Sri Lanka was one of the former administration’s key initiatives. The program had 15 tailor-made local- and donor-funded financial and non-financial schemes under its umbrella. The credit program aimed to provide access to finance at an affordable rate with the Government guaranteeing some of the loans and providing concessionary interest rates.
Enterprise Sri Lanka was a Budget proposal that was eventually rolled out in March 2018 by the Finance Ministry with some awardees being given an interest subsidy up to 75% of the effective interest rate. The aim was to create 100,000 new entrepreneurs by 2020.
At the time, the former Government expected to disburse Rs. 60,000 million through State and private banks to would-be entrepreneurs and another Rs. 5,000 million was set aside by the Treasury to reimburse the interest subsidy to the banks, according to updates made by former Finance Minister Mangala Samaraweera.
By October, the Bank of Ceylon had disbursed the largest share of loans totalling more than Rs. 17 billion with Commercial Bank coming in second with Rs. 12.5 billion. People’s Bank had disbursed Rs. 3.6 billion while the Regional Development Bank (RDB) had disbursed Rs. 5.9 billion. Hatton National Bank disbursed Rs. 6.8 billion, Seylan Bank Rs. 1.3 billion and Sampath Bank Rs. 5.5 billion.
In October the former administration said nearly 30,000 people had been given loans under Enterprise Sri Lanka and plans were afoot to expand financial allocations to the scheme in the Budget for 2020.